As the financial year draws to a close, tax professionals and businesses are preparing for the critical process of finalizing books of accounts for audit. A structured set of instructions and compliance checks has been issued to help accountants, business owners, and partners ensure smooth completion of audits and adherence to statutory requirements.
The guidelines, prepared by CA Harshil Sheth, emphasize accuracy in reporting, verification of balances, and timely reconciliation of accounts before sending data for final audit.
Key Instructions for Finalization
- TDS Checking
Businesses must carefully apply Tax Deducted at Source (TDS) on expenses such as interest, rent, commission, repairs, job work, and professional fees. From FY 2025–26, TDS on partnership remuneration and interest will also be applicable. Importantly, if turnover in FY 2024–25 exceeds ₹10 crore, TDS under Section 194Q will apply on purchases above ₹50 lakh. - Opening Balance Verification
As per last year’s audit report (FY 2023–24), opening balances in FY 2024–25 must match 100%. Supporting documents such as invoices, expenses, and bank statements up to March 2025 should be compiled to ensure continuity in accounting. - Bank Closing Matching
Businesses are required to reconcile all bank, cash credit, overdraft, and term loan balances as on March 31, 2025, with their books of accounts. Interest postings on loans like home loans, NBFC loans, CC loans, and OD loans up to March 31 must be fully accounted for. - Provision for Expenses
Adequate provisions must be made for March expenses and liabilities, including salaries, utilities, telephone, audit fees, statutory liabilities like GST, ESIC, and PF, as well as other outstanding payables. - Stock Checking
On March 31, 2025, businesses must conduct a physical stock verification and reconcile it with book records. This step is crucial for both Income Tax Audit and GST compliance. Discrepancies such as loss of stock or unrecorded sales must be investigated. - 26AS and AIS Reconciliation
All TDS/TCS receivables must be recorded after verifying Form 26AS, AIS, and TIS. Taxpayers should ensure that incomes from dividends, fixed deposits, deposits, and savings bank interest are properly booked. - Ledger Clearance
Suspense accounts, unadjusted receipts, and pending entries must be cleared before finalization. Any unverified or missing details from debtors or creditors should be identified and corrected. - Debtors and Creditors Reconciliation
Balances of debtors and creditors must be matched with their counterparties and confirmed. Book adjustments, including rounding differences, should be completed before audit. - Interest, Remuneration, and Depreciation
Partners’ interest should not exceed 12% per annum, and remuneration must strictly follow the Income Tax Act formula. Depreciation on assets should also be accounted for in the final books. - Final Documents Compilation
Businesses must urgently compile and submit critical documents including:
- Expenses and Fixed Asset Purchase File
- Sales & Purchase Registers (Tally)
- Sales & Purchase Invoices
- Bank Book and Statements
- Salary Register
- Stock Summary
- Loan Statements
- Final Tally Data
